Democrats find Trump’s tariff plans puzzling. Tariffs will raise prices. Tariffs will increase inflation. Tariffs tax imports. Tariffs will be a regressive tax, hitting those at the bottom hardest because cheap Chinese and other foreign made stuff is what millionaires sell, not what they buy. Walmart, Target, Home Depot teem with imports. It looks like Trump and his Republican bootlickers want to commit suicide by inflation, shortages and alienating businesses.
We have to follow the money to figure this out.
Tariffs are a hidden tax. There’s the rub and, the danger. Tariffs open the door for Trump to set up a protection racket—and it’s completely hidden.
The importer pays the tariff (tax) and then tacks it on to the price. There is no sticker saying “this price would be X percent lower without a tariff”. The sales receipt lists the sales tax on the product, not the tariff tax. And as the price goes up due to tariffs being passed on, so does the sales tax. A $10 product now with an 8% sales tax costs $10.80 to walk out the door. A $10 product with a 20% tariff costs $12, and the tax goes up 16 cents more on that $2 dollar price increase. So it’s now $12.96 to go out the door.
What does the voter see? They see the sales tax go up. They see the price of the product go up too, but they don’t know why.
In a democracy, taxing theory holds that taxes should be transparent. As much as possible they should be assessed according to the user using government services most, pays the most. Taxes on fuels support roads and bridges for example. So you see signs along road and bridge projects saying “your tax dollars at work”. Heavier vehicles create more road damage, so they pay more to be licensed. They also tend to use more fuel, so in theory, you can reduce your tax burden if you reduce your road use and the weight of your vehicle.
Your property tax bill specifies how parts of it go to schools, paying off bonds to build local infrastructure, fire services, etc. Bond proposals and the like are voted on with their cost to your tax bill openly posted.
Income taxes were introduced as a result of the first Progressive movement. The theory was those who have greater income should pay more because they are benefitting more from social wealth. A nationwide corporate owner can do business in every town in the US whereas a local small business person is limited to the local market. The only way to curb the ability of the big fish from eating the smaller fish was to tax the bigger fish more to somewhat limit their predation. The Progressive era also came up with the idea of instituting government anti-monopoly policies to break up and limit the power of big wealth and big business from dominating everything.
The oil companies and railroad companies came to be dominated by monopolists, and these monopolists then began to set prices at truly burdensome levels. They became explicit targets for the first Progressives. There are similar quasi or actual monopolies now exploiting us, but can you name them?
Democrats have failed miserably in calling out monopolies and the danger they pose. Kamala tried, Biden acted, but the party as whole has not made this a theme.
Income taxes show up every time you get a paycheck or pay your annual or quarterly taxes. So much for Social Security, so much for Medicare, etc. You know if you make more, you pay more, both in total and in percentage terms, at least in theory. Income taxes are very visible.
So why does Trump want to hide taxes behind tariffs?
Trump, arm in arm with the wealthiest people in America, wants to lower or even end income taxes and put tariffs in their place. What happens? Suddenly, people no longer know who pays what for services the Federal government provides. Yes, people will start paying more for imports so they will try to find US made products to substitute. But the fact imports cost more also allows US product makers to raise their prices, knowing that competition is now limited to US firms. Ah, but US corporations under Trump will have no limits on monopolistic domination of such production. Everyone on the business side is expecting Biden’s anti-monopoly actions to be utterly reversed.
Businesses theoretically have price limits on product sales prices when US made goods cost the same as imports. But all Trump or Republicans have to do is increase the tariffs on those goods. Hey, presto! The ceiling on pricing goes up.
Even better, Trump and the Republicans can dole out those tariff increases which are now pricing power protection according to how much a corporate monopolist in turn kicks back to them. Or more likely, to Trump’s personal PAC where he will control who gets a taste. It’s restoring his personal “charity” non-profit he lost in NY due to fraud.
This time, no one can stop him.
Tariffs thus become the ultimate form of a “protection racket”. Basically it’s a corruption tax. Trump can cut tariffs until the US producers scream. He can then increase tariffs and “protect” them from foreign competition when they pay him and fellow Republicans off. And most Americans are none the wiser about what is going on. Sure prices are fluctuating, but the causes of the changes in the price of goods is hidden. As is the corruption. And due to Citizens United and our corrupt Supreme Court, suddenly the Republican Party has all the money it needs to keep its propaganda channels running day and night and even expanding in reach, via a protection racket paid for by American citizens via a tax they don’t even see.
Even better, MAGA folks will no doubt be praising Trump and Republicans for lowering or even getting rid of the income tax. Since tariffs have hidden the taxes in the price of goods, they will be saying: “See, we’re so much better off now. Our Federal taxes have gone down so much! Now, with the costs of products so high, we need to reduce our property and sales taxes at the state level! We’re being taxed to death by the states and cities.”
Guess what happens then at the state level. Particularly in the blue states.
It’s the SALT tax move but far better hidden this time.
Trump is not stupid. He’s a genius at figuring out how to dupe people and coerce others, all to his enrichment and increase in power and influence. Don’t underestimate him. Also, don’t be conned by his sleight of hand: “Gender change is terrible, an immediate threat to you; Climate change is a hoax, or inevitable or a distant threat.” Gender change issues involve 1% or less. Climate change will impact 100% of us. He uses sensationalist attacks on helpless minorities to cover his pickpocketing of everyone and his suborning of the rich. And we feel we must defend the helpless because it is who we are.
And of course we must. But we must not let our defense dominate our messaging.
He puts us on the defense on purpose to throw our messaging off. We end up talking a lot about stuff that affects very few while then not having enough time left to focus on stuff that concerns the majority. People ignore what doesn’t involve or interest them. Most folks actually don’t care about transgender issues and even get bored or upset, and turn off hearing the discussion. By time the Democrat finishes their defense, they’ve lost the audience.
How to parry his attack?
For example if a Democrat is asked about transgender people in jail getting “free” transition treatments, answer: “Thanks for being interested in the 2 cases in the whole US that this involves. Everyone in jail gets free medical care. Continuing their treatment was cheaper for the taxpayer than trying to reverse it. But let’s talk about healthcare issues that concern everyone. Republicans want to end Obamacare and hand over the entire health system to a man with a worm in his brain because he wouldn’t listen to common sense medical advice about cooking fish or pork properly. And maybe we should try to save some tax money by not jailing so many people unless they are violent or repeat offenders. Almost every other country does this. Maybe it’s a good idea. Democrats want to save you money and fix things. Republicans just want to divert your attention while they pick your pocket.”
He throws us off our message with culture war tactics and everyone ends up paying him off with the tariff tactic. We must not be as gullible and ignorant as the MAGA folks about what he is doing and how he is doing it. And we must not underestimate what he is doing and what he is teaching his cowed fellow Republicans.
His crazy nominees for government posts are meant to distract us and the Republicans in the House and Senate while he achieves his real goal.
Reagan hid his real purpose of pushing wealth to the 1% behind a façade of grandfatherly humor and being a regular guy. Trump also has a real purpose. He is hiding it behind a façade of sensationalist cultural warfare and a tidal wave of lies and deflection. Part of that deflection is appointing obviously unqualified people to high positions. We will be arguing about these appointments while he uses executive authority to run his tariff scam.
Follow the money. With Trump, ALWAYS follow the money.
Future posts
In part two of this series published next Saturday morning on what Trump is up to this time, we follow the money further, but this time, it’s in your IRAs, 401ks, and the stock market. Chaos is coming, but it will be choreographed. At least, he will try to do so. But markets are fickle things prone to panic. And money markets will not be a refuge, not if the cryptocurrency bros, China and Russia have anything to do with it, and they do.
Note: before retiring from university teaching, I taught state-market interactions (political economy) and public administration in China from the mid 80s until about 10 years ago. Trump reminds me, a lot, of the late Mao era. Mao was the original chaos agent. He left China a complete wreck and in deep poverty. But he retained control to the end by methods very similar to Trump’s. MAGAs are a cross between Red Guards and Hitler’s Brown Shirts, just not fully activated yet. Kossacks who don’t know about Mao need to start learning about him, now. Trump is moving to bring the business class to heel like Hitler did. But he is using chaos, like Mao, as a cover while he does it.